Carbon Emissions Trading Policy and Regional Energy Efficiency: A Quasi-Natural Experiment from China

Abstract

The carbon emission trading system (ETS), as a market-based environmental regulation tool, remains the subject of ongoing theoretical debates and empirical gaps regarding its impact on energy efficiency and the underlying mechanisms. This study focuses on China’s carbon emission trading pilot policies, utilizing panel data from 30 Chinese provinces between 2003 and 2023. The SBM-undesirable model is employed to assess energy efficiency, and the difference-in-differences (DID) model is applied to identify the causal effects of the policy. Additionally, a mechanism-testing model is utilized to explore how the carbon emission trading policy enhances energy efficiency. The findings indicate the following: (1) overall energy efficiency in China has remained relatively stable over the past two decades, but high-efficiency regions exhibit significant regional clustering effects; (2) the carbon emission trading pilot policy has significantly improved energy efficiency in the pilot regions, with a dynamic trend of “shock–enhancement–stability”, reaching its peak effect in the third year post-implementation; (3) the mechanism analysis reveals that the policy primarily enhances energy efficiency through three channels: promoting green technology innovation, advancing the use of clean energy, and strengthening government environmental regulation. This study not only provides empirical evidence to support the optimization of carbon market policies but also offers a practical framework for developing countries to design emission reduction mechanisms that align with their economic structures and policy environments.

Keywords

• carbon emission trading
• energy efficiency
• difference-in-differences model
• clean energy use